Witness’s deal draws defense scrutiny

Frank Baker leaves the federal building after a hearing last year.

News Herald file photo

By CHRIS OLWELL | The News Herald

Published: Thursday, April 24, 2014 at 07:58 PM.

PANAMA CITY — Defense attorneys tried to raise questions about a key government witness and his deal with prosecutors during the third day of witness testimony in the trial of three former leaders of a failed local banking company.

Jim Powell met with federal agents and prosecutors at least six times before he began testifying Wednesday against Elwood West, Frank Baker and Terry Dubose, the chief financial officer, attorney and chief executive officer for Coastal Community Investments, which owned Coastal Community Bank and Bayside Savings.

West, Baker and Dubose have pleaded not guilty to a 12-count indictment charging them with conspiring to defraud the Federal Deposit Insurance Corporation out of millions of dollars.

Powell had a signed agreement with Assistant U.S. Attorney Gayle Littleton that information he provided in their meetings could not be used against him in court — as long as he told the truth — or used to enhance his sentence if he were charged and convicted of a crime. (No charges against him have been announced.)

Don Samuel, one of the attorneys representing West, questioned Powell about that agreement.

PANAMA CITY — Defense attorneys tried to raise questions about a key government witness and his deal with prosecutors during the third day of witness testimony in the trial of three former leaders of a failed local banking company.

Jim Powell met with federal agents and prosecutors at least six times before he began testifying Wednesday against Elwood West, Frank Baker and Terry Dubose, the chief financial officer, attorney and chief executive officer for Coastal Community Investments, which owned Coastal Community Bank and Bayside Savings.

West, Baker and Dubose have pleaded not guilty to a 12-count indictment charging them with conspiring to defraud the Federal Deposit Insurance Corporation out of millions of dollars.

Powell had a signed agreement with Assistant U.S. Attorney Gayle Littleton that information he provided in their meetings could not be used against him in court — as long as he told the truth — or used to enhance his sentence if he were charged and convicted of a crime. (No charges against him have been announced.)

Don Samuel, one of the attorneys representing West, questioned Powell about that agreement.

“Did you know what you would be sentenced for?”

“No.”

“Did you know what they would prosecute you for?”

“No.”

Samuel had questioned Powell about a key omission on a confirmation — an important document used by banks and auditors to confirm details about a bank’s debts.

Powell worked at the time for Royal Bank of Canada (RBC) making loans to other banks, but in 2008 RBC took over the bank that preceded it and wanted to move away from interbank lending. Powell’s loan to CCI was well-known among his bosses and had become a “thorn in his side.”

West and Powell were at the time scrambling to find a way for Coastal to repay the $3 million to RBC. Powell said it was “an oversight” that the confirmation did not reflect that RBC held Coastal’s stock as collateral against a $3 million loan issued in 2007.
The omission created the impression, on paper at least, that Coastal’s debt was unsecured and was eligible for a guaranteed loan under the newly, quickly created Temporary Liquidity Guarantee Program.

Samuel held up the agreement as he cross examined Powell Thursday.

“You didn’t need this … because of that mistake, did you?”

“No.”

Whether Center State, the bank that received the faulty confirmation, issued a $3.75 million loan based on the omission or for some other reason remains to be seen, but it did issue the loan. Powell said Thursday he did support and encourage Center State to take over RBC’s loans to Coastal.

Coastal repaid RBC with the loan, then Coastal failed and the FDIC repaid the $3.75 million to Center State.

Upon further questioning from Littleton, Powell said the agreement with the government was struck at his attorney’s behest; the agreement doesn’t provide immunity and required only a truthful statement. Littleton didn’t tell him what to say during his testimony, Powell said.

Powell’s testimony, which began Wednesday afternoon, took up much of the afternoon Thursday after Judge Richard Smoak closed the courtroom to the public. It appeared he was questioning jurors individually, but there was no explanation for the closure when the courtroom reopened.

The trial is expected to last several more days.

An earlier version of this story is posted below:

PANAMA CITY — The federal criminal trial of three leaders of failed local banks was suspended Thursday morning and the courtroom closed to spectators while Judge Richard Smoak questioned the 12 jurors and two alternate jurors one at a time.

Spectators were briefly allowed back in the courtroom after a recess for lunch without an explanation for the closure in the case against Frank Baker, Elwood West and Terry Dubose, who are charged in connection to an alleged conspiracy to defraud the Federal Deposit Insurance Corporation out of millions of dollars.

West, Dubose and Baker were chief financial officer, chief executive officer and attorney, respectively, for Coastal Community Investments, the holding company that owned Coastal Community Bank of Panama City Beach and Bayside Savings of Port St. Joe. They each have pleaded not guilty to the charges in a 12-count indictment.

The delay came on the third day of a trial lawyers initially expected to last two weeks. In court Wednesday, prosecutor Gayle Littleton told Smoak jury selection and testimony had taken longer than she’d planned for and it was unlikely she would still be able to finish presenting evidence by the end of the week as she had anticipated.

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